Article

Monitoring inflation when applying ASC 830

Jan 11, 2024
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Financial reporting Presentation & disclosures SEC matters Audit

The Center for Audit Quality (CAQ) SEC Regulations Committee and its International Practices Task Force (the Task Force) periodically accumulates and discusses certain inflation data to assist companies in monitoring inflation statistics in connection with their determination of the inflationary status of countries in which they have operations. The most recent discussion document that represents the accumulation of information used to facilitate a discussion among the Task Force members is available on the CAQ’s site.

The discussion document categorizes the countries based on their cumulative inflation rates and implementation guidance in Topic 830 of the Financial Accounting Standards Board’s Accounting Standards Codification (ASC), Foreign Currency Matters. The countries included in the discussion document are those for which the International Monetary Fund (IMF) publishes data. Accordingly, there may be other countries that are not mentioned in the Task Force discussion document because the IMF does not include inflation data for all countries. Moreover, financial statement preparers should be especially prudent when monitoring inflation data in countries where there is a concern about the reliability of the inflation data.

The information in the discussion document may be helpful to financial statement preparers in applying ASC 830, in conjunction with their internal controls over financial reporting, to reach a conclusion on whether a country’s economy should be considered highly inflationary. As a reminder, according to ASC 830, an economy is considered highly inflationary when it has a cumulative inflation rate of approximately 100% or more over a three-year period. Ghana, Sierra Leone and Yemen have recently been added to the category of economies with three-year cumulative inflation rates exceeding 100%.

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